According to Japanese financial services major Nomura's Composite Leading Index (CLI), some growth consolidation is likely in the Q4 (October-December), followed by a sharp recovery in Q1 (January-March) 2018 due to ongoing remonetisation and improving global demand.
"We remain bullish on the growth outlook. We expect GDP growth to rise to 6.7 per cent year-on-year in Q4 (October- December) from 6.3 per cent in Q3 (July-September), followed by a stronger rebound to 7.5 per cent in 2018," Nomura said in a research note.
The report further noted that a tightening of monetary policy is likely owing to inflationary pressures and higher oil prices.
Moreover, the minutes of the December 6 monetary policy committee (MPC) meeting suggest that even as most members saw upside risks to inflation, weak growth concerns have held them back.
"We expect slightly more hawkish rhetoric from the monetary policy committee in Q2 2018, when both growth and inflation are likely to be significantly higher, but we believe rates will be left unchanged through 2018 due to an ample real rate cushion," Nomura said.
The Reserve Bank in its fifth bi-monthly review of this fiscal kept repo rate unchanged at 6 per cent and reverse repo at 5.75 per cent, while raising the inflation forecast for the remainder of 2017-18 to 4.3-4.7 per cent.